States Counting on Stimulus Aid to Balance Budgets

Senate Majority Leader Harry Reid has announced agreement on an economic stimulus bill. He says the legislation should create 3.5 million jobs once President Barack Obama signs it into law and it takes effect. Video by AP

If the House version of the federal stimulus package becomes law, Ohio will save 300 youth services jobs, 130 more in addiction counseling and at least 20 positions for aides who provide a respite to relatives of Alzheimer's patients. It would mean keeping as many as 8,000 children in state-supported child care and saving 500 corrections jobs in a state where prisons are well over capacity.

If the Senate version triumphs, all of those jobs and subsidies -- plus many more -- will disappear, said Gov. Ted Strickland (D), who has joined with other governors to press members of Congress to back the more generous House approach.

The two chambers began to resolve their differences yesterday on how much money to send to states and other sticking points, after the Senate passed an $838 billion stimulus package. Senate and House leaders played down discrepancies between the two versions, saying that both would provide a boost to the economy and that an agreement on a final bill could come as soon as the end of the week.

But for states, the differences are potentially enormous. The House included $79 billion in direct aid to states, $40 billion more than the Senate, and governors are counting on that money to help balance budgets that are billions in the red.

"If the Senate version holds, there will be very deep cuts," said Wisconsin Gov. Jim Doyle (D), who added that the cost to the state and its 5.3 million residents would be $600 million. "We're going to see teachers and firefighters and police officers lose their jobs."

In Maryland, a legislative staff analysis found that the state would lose nearly $1 billion under the Senate version, including $454 million in discretionary funding, nearly $200 million in school construction money and nearly $100 million more for higher education projects.

Virginia lawmakers are counting on stimulus funding to help close a $3 billion budget gap. "If the Senate will just move a little closer to the House version, that will provide some very significant tax relief, funding of Medicaid and an extension of unemployment insurance," Gov. Timothy M. Kaine (D) told reporters yesterday.

The Senate halved the $79 billion as part of a deal to win the support of centrists in both parties who doubted the value and necessity of untargeted aid to states. Some Republicans also had ideological objections, based on a belief in tax cuts and skepticism about expanding the federal government's role in local projects such as school construction.

The discussions between House and Senate negotiators over state aid are likely to be heated, predicted Rep. Anthony Weiner (D-N.Y.), who emerged from a meeting of the House Democratic caucus yesterday to say that the removal of the money was "the source of a lot of gnashing of teeth." If the funding is not restored, he said, many members fear that state governments will pass on the pain to localities. He added that New York would lose $1.6 billion from its share of stimulus money if the Senate version prevails.

"This is the unstoppable force and the immovable object," Weiner said. "The unstoppable force is the Democratic majority in the House. The immovable object seems to be the 60-vote margin they need to have in the Senate."

The House bill provided $39 billion for state education budgets, $15 billion for incentive grants and innovation, and $25 billion that governors could use at their discretion. The Senate cut the education aid to $31.3 billion and the incentive money to $7.5 billion, and it eliminated the $25 billion in discretionary funding.

Strickland, coping with a projected $7.3 billion budget deficit in the next two years, said he was "puzzled" by the Senate decision. He blamed Republicans, especially moderates, for insisting on tax cuts, including a $70 billion fix to the alternative minimum tax. To him, the "most direct, effective and quickest way" to inject money into the economy is to save state jobs.